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Roche Holding AG ROG

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Roche Shares Undervalued Post-Q3; Base Business Strength Outweighs COVID-19 Diagnostics Uncertainty

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

We're maintaining our $58/CHF 426 fair value estimate for Roche following solid 8% constant currency sales growth in the third quarter that reflects strength in the firm's core franchises. Management raised full-year 2021 guidance to mid-single-digit sales and similar core EPS growth, from low- to mid-single-digit growth, partly due to the rise of the delta variant and higher than expected continued sales of Roche's COVID-19 diagnostics (PCR and antigen tests, with CHF 4.6 billion in sales in the past 12 months) and treatments (antibody cocktail Ronapreve and immunology drug Actemra, which likely saw roughly CHF 2 billion in COVID-19 sales in the past 12 months). While visibility on future demand for COVID-19 products is weak, we generally expect lower demand in the fourth quarter, followed by a significant drop-off in 2022, which assumes that vaccines become available globally and that a new vaccine-resistant variant does not emerge.

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Company Profile

Business Description

Roche is a Swiss biopharmaceutical and diagnostic company. The firm's best-selling pharmaceutical products include a variety of oncology therapies from acquired partner Genentech, and its diagnostics group was bolstered by the acquisition of Ventana in 2008. Oncology products account for 60% of pharmaceutical sales, and centralized and point-of-care diagnostics for more than half of diagnostic-related sales.

F. Hoffmann-La Roche Ltd
Basel, CH-4070, Switzerland
T +41 616888880
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 101,465